ISLAMABAD, May 7: Pre-sident Asif Ali Zardari on Monday gave assent to the Stock Exchanges (Corporati-sation, Demutualisation and Integration) Act, 2012 aimed at strengthening the country’s stock exchanges and safeguarding interests of small investors.

The president signed the bill in a ceremony held in the presidency which was attended by finance ministers, chairmen stocks exchanges and politicians.

The demutualisation bill was earlier approved in a joint session of the parliament on March 27, 2012.

President’s spokesperson Farhatullah Babar said the law required the stock exchanges to be demutualised within 119 days of its promulgation in accordance with timelines specified for completion of various milestones involved in the demutualisation exercise.

Giving background he said that at present the Pakistani stock exchanges were operating as non-profit companies with a mutualised structure wherein the members have the ownership as well as trading rights.

This structure inherently creates conflict of interest as members predominantly control the affairs of the stock exchange which results in lack of transparency in the operations of the stock exchange and compromises investors’ interest.

Due to lack of resources the stock exchanges have not been able to grow to the expectations of investors as trading activity is mostly concentrated in three buildings of these exchanges with the dominant share going to the Karachi Stock Exchange, he said.Under the new law members and the strategic investor shall hold 40 per cent each where 20 per cent shares shall be offered to the general public.

Within 30 days of demutualisation, the exchange shall hold elections of its nominated directors and the chairman of the board will always be from the directors not representing the members also known as TRE certificate holders.

After the demutualisation the stock exchange shall be listed on itself, however, its listing shall be managed and administered by the commission. Any two or more exchanges could integrate with each other without the involvement of the court of law. “The corporatisation and demutualisation of stock exchanges would entail converting the stock exchanges’ structure from non-profit, mutually owned organisation to for-profit entities owned by shareholders. Demutuali-sation would result in increased transparency at the stock exchanges and greater balance between interests of various stakeholders by clear segregation of commercial and regulatory functions and separation of trading rights and ownership rights,” the spokesman said.

The spokesman said that demutualisation was a well-established global trend and almost all stock exchanges worldwide operate in demutualised set up.

“The enactment of this law will bring the Pakistani capital market on par with other international jurisdictions like India, Malaysia, Singapore, USA, UK, Germany, Australia, Hong Kong and Turkey among others,” he said.

The new law will help expand market outreach, attract new investors, improve liquidity and enable the stock exchange to attract international strategic partners. Demutualis-ation will also facilitate consolidation of brokers leading to financially strong entities, he said.